Fixing Australia’s loopholes that enable the flow of dirty money

Amelia Pace
Project and Executive Officer
Transparency International Australia

Editor’s Note: With the release of the Pandora Papers just as this newsletter is being published, this guest article from our colleagues at Transparency International Australia is timely. TINZ’s activities and positions around anti-money laundering and beneficial ownership mirror that of TI Australia.

TI Australia has long been calling for beneficial ownership disclosure and strengthened anti-money laundering and counter terrorism financing (AML/CTF) legislation. TI defines a beneficial owner as “the real person who ultimately owns, controls or benefits from a company or trust fund and the income it generates”. A beneficial ownership register collates information about the beneficial owner in a registry for storage and use by enforcement agencies, the private sector and, in some jurisdictions, the public. To date, a lack of political will has resulted in little progress in these areas in Australia. 

Improving Global Standards

Recent global developments however are promising, as Australia faces pressure to keep up with global standards.

The Financial Action Task Force (FATF) is considering potential amendments to Recommendation 24 on the transparency and beneficial ownership of legal persons. TI Australia has put in a submission calling for a new global standard of beneficial ownership transparency, requiring all countries to record and disclose beneficial ownership information in a publicly accessible register.

(The Financial Action Task Force is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society.)

The beneficial ownership transparency agenda has gained significant momentum over the past decade. 

TI Australia’s Submission to FATF

Our submission to the FATF consultation highlighted how an effective AML/CTF regime requires a robust and up-to-date understanding of how criminals might misuse domestic and/or foreign legal persons to commit crimes and launder money. We stressed that regulators have an important role to play to ensure that beneficial ownership registers have adequate, accurate and up-to-date information.

The main counterargument against reporting beneficial information is that there may be a compliance burden on low-risk companies if they are required to identify and report on their beneficial owners.TI have demonstrated there is no evidence suggesting that there is an additional compliance burden for such companies. 

We also highlighted that countries need to ensure that legal and institutional frameworks enable the collection of adequate, accurate and up-to-date information in beneficial ownership registers. We believe the primary responsibility to verify beneficial ownership information should lie with the registry authority (or public body responsible for collecting beneficial ownership information). The registry authority should be mandated by law to independently verify the information provided by legal entities.

It is also vital that adequate powers and resources are given to the authority to allow them to check the information provided by legal entities, request documents, carry out inspections and sanction non-compliance.

Although significant progress has been made at the international policy level to recognise the problems linked to beneficial ownership secrecy and weak AML/CTF legislation, progress is uneven, with many countries, including Australia, failing to meet their commitments.

TI Australia will continue to call for beneficial ownership disclosure and strengthened AML/CTF legislation in order to prevent Australia continuing as a major destination of the world’s dirty money.

About the author: Amelia has been with TI Australia for 2.5 years. Her experience encompasses roles across a variety of areas including advocacy, research, and coordination.

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